Evidence from Mercosur suggests that eliminating duty drawbacks for intra-regional exports would lead to increased counterlobbying against protection of intermediate products. Without the duty drawback, the common external tariff would have been an estimated 3.5 percentage points (25 percent) higher on average.

January 2001 Evidence from Mercosur suggests that eliminating duty drawbacks for intra-regional exports would lead to increased counterlobbying against protection of intermediate products. Without the duty drawback, the common external tariff would have been an estimated 3.5 percentage points (25 percent) higher on average. Duty drawback (or rebate) systems reduce or eliminate the duties paid on imported intermediate goods or raw materials used in the production of exports. When a firm imports an intermediate product for use in the production of an export good, tariff payments on the imported intermediate good are either waived (duty drawback) or returned to the producer once the final product is exported (rebate). These incentive systems are often justified on the grounds that they tend to correct the anti-trade bias imposed by high tariff levels. The problem with this line of reasoning is that it assumes that tariffs are predetermined policy variables; if they were, the easiest way to reduce their anti-trade bias would be to eliminate them. But this is rarely done because existing levels of protection correspond to a political economy equilibrium difficult to modify in the presence of lobbying pressures. Cadot, de Melo, and Olarreaga show that in a political economy setting where tariffs and duty drawbacks are endogenously chosen through industry lobbying, full duty drawbacks are granted to exporters that use imported intermediate goods in their production. This in turn decreases their incentives to counterlobby against high tariffs on their inputs. Indeed, under a full duty drawback regime, tariffs on intermediate goods are irrelevant to exporters because they are fully rebated. In equilibrium, higher tariffs will be observed on these goods. Creating a regional trading bloc alters the incentives by eliminating duty drawbacks on intraregional exports, which leads to lower tariffs for goods that intraregional exporters use as inputs. Evidence from Mercosur suggests that eliminating duty drawbacks for intra-regional exports would lead to increased counterlobbying against protection of intermediate products. Cadot, de Melo, and Olarreaga estimate that without this mechanism, the common external tariff would have been 3.5 percentage points (25 percent) higher on average. This paper--a product of Trade, Development Research Group--is part of a larger effort in the group to study the political economy of trade policy. The research was funded by the Bank's Research Support Budget under the research project "The Anti-export Bias of Duty Drawbacks." The authors may be contacted at [email protected], [email protected], or [email protected].

This three-volume set presents the results of a research project initiated by the African Economic Research Consortium. The project intended to identify and examine the critical analytical and policy issues involved in Africa's economic links with the rest of the world, particularly in the context of the emerging global trading system. The project had two distinct but closely related component parts. The first was based on empirical, region-wide analysis and was designed to provide the framework for the menu of issues explored.

The global financial crisis of 2008/9 is the Great Depression of the 21st century. For many though, the similarities stop at the Wall Street Crash as the current generation of policymakers have acted quickly to avoid the mistakes of the past. Yet the global crisis has made room for mistakes all of its own. While governments have apparently kept to their word on refraining from protectionist measures in the style of 1930s tariffs, there has been a disturbing rise in "murky protectionism." Seemingly benign, these crisis-linked policies are twisted to favour domestic firms, workers and investors. This book, first published as an eBook on VoxEU.org in March 2009, brings together leading trade policy practitioners and experts - including Australian Trade Minister Simon Crean and former Mexican President Ernesto Zedillo. Initially its aim was to advise policymakers heading in to the G20 meeting in London, but since the threat of murky protectionism persists, so too do their warnings.

Differences in the choices of trade and macro policies, both by developing countries and by developed countries towards developing countries, have been critical in determining the overall performance of developing countries. All too often, the performance of developing countries has not been assessed using appropriately conducted studies. The papers in this book are chosen to bridge this gap and show how a quantitative approach to policy evaluation can help resolve controversies and explain the choice of observed policies.The book brings together carefully selected papers that assess the impacts of various trade and macro policies, by quantifying the policies of developing countries at the macro level (exchange rate, investment, savings) and at the sector level (trade and industrial policies), in addition to policies of developed countries towards developing countries (trade preferences, quotas, VERs and migration policies). Facets of the political economy of trade, migration, and climate policies are explored (such as the enlargement of the EU, the rise of regionalism and how it can ease the pains of adjustment to trade liberalization, openness and inequality). Growing tensions between trade and the environment are also investigated. In short, this book covers a wide area of events ranging from external and internal shocks to external and internal policies, showing how the consequences of these events can be brought to rigorous quantitative analysis.

Publisher's description: Developing countries are increasingly confronted with the need to address trade policy related issues in international agreements, most prominently the World Trade Organization (WTO). New WTO negotiations on a broad range of subjects were launched in November 2001. Determining whether and how international trade agreements can support economic development is a major challenge. Stakeholders in developing countries must be informed on the issues and understand how their interests can be pursued through international cooperation. This handbook offers guidance on the design of trade policy reform, surveys key disciplines and the functioning of the World Trade Organization (WTO), and discusses numerous issues and options that confront developing countries in using international cooperation to improve domestic policy and obtain access to export markets. Many of the issues discussed are also relevant in the context of regional integration agreements. Separate sections of the handbook summarize what constitutes sound trade policy; the major aspects of the WTO from a development perspective; policy issues in the area of merchandise trade and the liberalization of international transactions in services; protection of intellectual property rights and economic development; new regulatory subjects that are emerging in the agenda of trade talks; and enhancing participation of developing countries in the global trading system.